How Rental Car Reimbursement Works
Coverage triggers: Rental reimbursement pays when your car is undrivable or being repaired due to: • Collision damage: Accidents with other vehicles or objects • Comprehensive claims: Theft, vandalism, weather damage, animal strikes • Total loss: When your car is declared totaled (pays until settlement)
When it doesn't pay: • Routine maintenance (oil changes, tire rotations) • Mechanical breakdowns or engine failures • Manufacturer recalls • Your car is drivable but you prefer not to drive it • Pre-scheduled repairs unrelated to an insurance claim
Coverage structure: Rental reimbursement has two limits: • Daily limit: Maximum per day (typically $30-75) • Time limit: Maximum number of days (typically 30 days)
Common coverage options: • $30/day, 30-day max: Up to $900 total • $40/day, 30-day max: Up to $1,200 total • $50/day, 30-day max: Up to $1,500 total • $75/day, 30-day max: Up to $2,250 total
Example scenario: • Your car is hit in a parking lot • Repairs take 10 days • You have $40/day rental reimbursement • Rental car costs $45/day • Your coverage pays: $400 ($40 × 10 days) • You pay: $50 ($5/day overage × 10 days)
Choosing the right limits: • Check typical rental car rates in your area • Economy/compact cars: $30-40/day • Mid-size cars: $40-50/day • SUVs/premium vehicles: $60-100+/day • Match your daily limit to realistic rental costs for a vehicle similar to yours
What Does Rental Reimbursement Cover?
Rental car expenses: • Daily rental rate: Base cost of renting the vehicle • Taxes and fees: Standard rental taxes and airport fees (if applicable)
What it typically doesn't cover: • Optional rental car insurance: Collision damage waiver (CDW), liability insurance, personal effects coverage sold by rental companies—your auto insurance likely already covers these • Gasoline: Fuel costs or "fuel service options" from rental companies • Upgrades: Premium vehicle upgrades beyond your coverage limit • GPS or accessories: Navigation devices, car seats, toll transponders • Additional drivers: Fees for adding extra drivers to the rental • Underage driver fees: Surcharges for drivers under 25 • Mileage overages: Extra charges if you exceed the rental agreement's mileage allowance
Payment methods:
Direct billing (preferred): Some insurers work with rental companies to bill directly. You show your claim number, and the rental company bills your insurer.
Reimbursement method (most common): You pay the rental company upfront and submit receipts to your insurer for reimbursement. Keep all: • Rental agreements • Receipts • Proof of payment • Mileage records
How Much Does Rental Reimbursement Cost?
Annual cost by coverage level: • $30/day coverage: $20-30 per year • $40/day coverage: $25-35 per year • $50/day coverage: $30-40 per year • $75/day coverage: $40-60 per year
Cost factors: • Your location (urban areas cost slightly more) • Your driving record (clean records = lower rates) • Your vehicle type (luxury/expensive vehicles may cost more) • Your insurance company (rates vary by insurer)
Cost-benefit analysis: • Average rental car cost: $40/day × 7 days = $280 • Annual coverage cost: $30 • Break-even: If you need a rental once every 9 years, the coverage pays for itself
If you have comprehensive + collision coverage: Adding rental reimbursement costs roughly 1-2% of your total premium. It's one of the most affordable optional coverages.
Is it worth the cost? • High value if you: Rely on your car for work, family obligations, or daily activities • Moderate value if you: Have alternatives (second car, public transit, ride-sharing) but prefer convenience • Low value if you: Have reliable alternative transportation or rarely drive
Who Needs Rental Car Reimbursement?
You should consider rental reimbursement if you:
Depend on your car daily: You commute to work, drive kids to school, or rely on your vehicle for essential daily activities. Being without a car for even a few days creates significant hardship.
Have no backup vehicle: Single-car households benefit most. If your only car is in the shop, you need alternative transportation.
Live in areas with limited public transit: Rural and suburban residents often can't easily rely on buses, trains, or ride-sharing. A rental car becomes essential.
Use your car for work: If you're self-employed, make deliveries, attend client meetings, or need a vehicle for your job, downtime costs you income.
Have family obligations: Parents with school-age children, caregivers for elderly relatives, or anyone with regular transportation commitments benefit from continuous access to a vehicle.
Want predictable costs: Paying $30/year for coverage prevents surprise $300-600 rental bills after an accident.
Drive a higher-value or newer vehicle: If repairs will take longer (parts availability, specialized shops), rental duration—and costs—increase.
You might not need rental reimbursement if you: • Own multiple vehicles (spouse's car, backup vehicle) • Have excellent public transportation options • Work from home or have flexible transportation • Have financial reserves to cover occasional rental costs out-of-pocket • Rarely drive (low-mileage drivers have fewer claims)
Rental Reimbursement vs. Other Options
Rental reimbursement vs. credit card rental coverage:
Many credit cards offer rental car coverage, but: • Credit card coverage: Covers damage to the rental car (collision damage waiver) • Rental reimbursement insurance: Pays for renting the car in the first place
They're complementary, not substitutes. Your rental reimbursement pays for the rental; your credit card protects the rental car from damage.
Rental reimbursement vs. roadside assistance:
Some policies bundle rental reimbursement with roadside assistance. If your car breaks down mechanically: • Rental reimbursement: Doesn't cover mechanical breakdowns • Roadside assistance with towing: May include a day or two of rental coverage if repairs can't be completed immediately
They work together but serve different purposes.
Rental reimbursement vs. rental car company insurance:
When you rent: • Your rental reimbursement: Pays for the rental cost • Your liability + collision + comprehensive: Covers damage to the rental and liability • Rental company insurance (CDW/LDW): Unnecessary if you have full coverage on your personal policy
You typically don't need rental company insurance if you have comprehensive and collision coverage on your own car.
How to Use Rental Car Reimbursement
After a covered incident:
1. File a claim with your insurer Report the accident or damage as soon as possible. Mention that you'll need a rental car.
2. Get approval Your adjuster will confirm coverage and provide: • Claim number • Rental authorization (if direct billing is available) • Daily and total limits • Approved rental duration
3. Choose a rental company Your insurer may have partnerships with national chains (Enterprise, Hertz, etc.) for easier billing. You're typically free to use any rental company, but partnerships may offer: • Direct billing (no upfront payment) • Streamlined paperwork • Faster processing
4. Pick up your rental Bring: • Your driver's license • Credit card (for security deposit, even if insurance pays) • Claim number and authorization (if applicable) • Proof of insurance
5. Stay within limits • Rent a vehicle within your daily limit (or be prepared to pay overages) • Return the car before your time limit expires • If repairs take longer than expected, contact your adjuster for an extension
6. Submit receipts (if reimbursement method) • Final rental invoice • Proof of payment • Mileage records • Any other documentation your insurer requests
Processing time: Reimbursements typically process within 7-14 days after you submit receipts.
If repairs exceed the time limit: Contact your insurer immediately. They may: • Extend coverage for a few extra days • Advise you to return the rental and find alternative transportation • Process a total loss claim if repairs are extensive
Rental Reimbursement During a Total Loss
If your car is totaled:
Coverage continues until: • Your insurer issues a settlement check, or • You reach your time limit (typically 30 days) • Whichever comes first
Example timeline: • Day 1: Accident occurs; you file a claim and get a rental • Day 5: Adjuster determines the car is a total loss • Day 10: You receive and accept the settlement offer • Day 12: Settlement check is issued • Rental coverage ends: Day 12 (or a few days later if negotiated)
What if you haven't found a replacement car yet? Your rental reimbursement stops when the settlement is issued, even if you haven't purchased a new car. Plan accordingly: • Start shopping for a replacement as soon as totaling is determined • Negotiate a few extra days if needed • Use alternative transportation after coverage ends
Extended coverage options: Some insurers offer "extended transportation expense" coverage that pays for longer rental periods during total loss claims. This costs more but provides additional protection.
Common Rental Reimbursement Mistakes
Mistake 1: Not notifying your insurer immediately Some policies require you to notify the insurer before renting. If you rent first and notify later, your claim might be denied.
Mistake 2: Renting a vehicle beyond your daily limit If you have $30/day coverage and rent a $60/day SUV, you'll pay $30/day out-of-pocket. Choose a vehicle within your limit.
Mistake 3: Buying unnecessary rental car insurance The rental company will offer collision damage waivers, liability insurance, and personal effects coverage. If you have comprehensive and collision on your personal policy, you're already covered—don't pay twice.
Mistake 4: Keeping the rental too long If repairs are finished but you keep the rental for convenience, you'll pay out-of-pocket after your authorized period ends.
Mistake 5: Not keeping receipts If your insurer reimburses rather than direct-bills, you need receipts to get paid. Keep everything.
Mistake 6: Assuming coverage for mechanical breakdowns Rental reimbursement only covers repairs from collision or comprehensive claims, not mechanical failures. Consider mechanical breakdown insurance or an extended warranty if you're concerned about breakdowns.
Alternatives to Rental Reimbursement Coverage
If you decide not to buy rental reimbursement:
Emergency fund: Set aside $300-500 for unexpected rental costs. If you need a rental once every few years, paying out-of-pocket may be cheaper than annual premiums.
Ride-sharing and public transit: For short repair periods (1-3 days), Uber, Lyft, or public transportation might cost less than a rental.
Borrow a vehicle: Friends, family, or neighbors may lend you a car temporarily.
Employer or membership programs: Some employers, AAA, or other memberships offer discounted rental rates or temporary transportation assistance.
Loaner cars from repair shops: Some body shops and dealerships provide free loaners during repairs (though availability isn't guaranteed).
Compare costs: • Rental reimbursement coverage: $30/year for $40/day, 30-day max • One week rental (out-of-pocket): $280 (7 days × $40/day) • Break-even: Coverage pays for itself if you need a rental once in 9+ years
For most drivers, the low cost of rental reimbursement makes it worthwhile.
Frequently Asked Questions
Rental car reimbursement typically costs $20-40 per year, depending on your coverage limits. For example, $40/day coverage for up to 30 days usually costs about $30 annually. It's one of the most affordable optional car insurance coverages.
No. Rental reimbursement only pays when your car is being repaired due to a covered collision or comprehensive claim (accidents, theft, vandalism, weather damage). It doesn't cover routine maintenance, mechanical failures, or breakdowns.
Most rental reimbursement policies have a 30-day maximum, though some offer 45 or 60 days. Coverage lasts either until your car is repaired, your insurer settles a total loss claim, or you reach the maximum number of days—whichever comes first.
No, if you have comprehensive and collision coverage on your personal auto policy. Your insurance already covers damage to rental cars. Rental reimbursement pays for the rental cost, and your regular coverage protects the rental vehicle. You can decline the rental company's insurance.
Usually yes, but your insurer may have partnerships with specific rental companies that offer direct billing and easier claims processing. You're free to use any company, but partnered companies often make the process more convenient.